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By Acura Labs | 15 November 2020

Managing Income is Never Wrong

Do you have an empty wallet at the end of the month? Of course this is annoying and has to be avoided! But strange, for some people, this is often a recurring problem. As a result, looking for a loan has become a routine while waiting for the next months’ payday.

For example Mike Tyson, he was a world heavyweight boxing champion in the 80’s who had lived in wealth. He was bankrupt and left a debt that had to sleep on the street because his house was confiscated as collateral.

If large income is the answer to financial problems, of course the above phenomenon will never happen. However, the key is how much of your income you can set aside and manage, because that is what will determine our future. Here are the reasons why you need to manage the income you have:

The income period is shorter than the life span

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Let’s take a look at the illustration above. From this graph emerges a challenge: how can the income earned for 30 years be sufficient to finance the independent life span from the age of 25 to 75 years, or in other words, for 50 years? You need to realize that this month’s income should not only be enjoyed this month. Thus, setting aside income and investing is not just an option but a necessity.

Inflation: The invisible thief

What is inflation? Inflation is a decrease in the value of a currency that can occur due to an increased amount of money in circulation or in the price of goods and services. Based on data from the Central Bureau of Statistics, the average inflation rate in Indonesia in the last five years is 3% – 4% per year.

Inflation is a factor that needs to be taken into account if you have financial goals in the future. For example, if you plan to buy an asset in the next five years which currently has a price of Rp. 100 million, then in five years the price will have increased to Rp. 116 million with an inflation rate of 3%.

Sleep better without worrying too much about things out of your control

Remember, life must have obstacles. There are times when disasters come uninvited and can drain the contents of savings. In financial management, mitigation of possible life risks also needs to be done. Mitigation can be done by preparing unexpected funds in the form of reserve funds or emergency funds. In addition, you can also transfer financial risk by having insurance protection.

Now, after knowing why you have to do financial management, here are the next steps you need to do:

1. Gathering financial information: There are no secrets between us

For those of you who are married, managing personal finances when you are married will definitely intersect with your partner’s finances. This is where trust in a partner is needed, because in managing family finances, financial information between partners needs to be disclosed. Come on, see the illustration below to find out what financial data you need to know about your partner!

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This also applies to singles, because the data above is the starting point for financial management.

2. Know the financial capabilities that are owned by making a budget

From existing income and expenditure data, you can measure how much financial capacity you have. The main key is, don’t have a lifestyle that exceeds your financial ability. Creating a budget will keep you running in the appropriate financial capacity corridor.

3. Have dreams: Create Financial Goals

Vacationing with your family, owning a dream home, buying your dream car and sending your children to your favorite school are dreams that can be fuel to encourage you to do financial management. Turning dreams into financial goals will be a guide for you, so you know what your money will be used for. This will make your steps more stable in managing finances.

So, until here, you are getting more interested in managing finances, right? We will present interesting articles that will discuss in depth the sundries of financial management, stay tuned!

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